The Middle East conflict has triggered widespread supply shocks for multiple commodities, deeply impacting the global energy, petrochemical, agriculture, and shipping industries, among others. The disruption of shipping through the Strait of Hormuz, which handles nearly 27% of global maritime oil trade, has triggered historic shortages and long-term operational strain on the Gulf’s energy infrastructure, with repairs to damaged liquefied natural gas (LNG) facilities in Qatar estimated to take up to five years.
Even with de-escalation efforts underway, the rerouting of oil tankers and the war risk premium are expected to maintain structurally higher floor prices for energy and refined products. Here are the five commodities that have been most affected by the war in Iran.
#1. Crude oil
This is the largest by far. About 20% of global oil consumption typically passes through Hormuz, including exports from Saudi Arabia, Iraq, Kuwait, the United Arab Emirates and Qatar. Asian buyers such as China, India, Japan and South Korea are especially exposed. Crude oil prices have remained largely headline-driven, following the direction of conflict escalations and de-escalations in the near term. Medium and long-term prices should be supported by strategic reserve purchases, a focus on nationalism and resource hoarding, and logistical delays caused by disruption.
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However, a prolonged shutdown could trigger a catastrophic supply shortfall, deplete trade reserves, push physical cargo premiums to historic premiums, and force global benchmark prices like Brent to rise sharply.
When immediate delivery is threatened, physical crude oil prices (such as North Sea Forties) become decoupled from financial futures. Buyers pay huge premiums for available unblocked barrels, causing an immediate contraction in the physical market. The closure of direct export routes from the Persian Gulf forces long detours. Tankers rerouting around the Cape of Good Hope cause massive increases in marine insurance premiums and shipping durations, implying a hefty logistics premium on the final cost of physical crude oil.
#2. LNG (Liquefied Natural Gas)
Qatar is one of the world’s largest LNG exporters and traditionally accounts for approximately 20% of global liquefied natural gas supply. Operating mainly from the huge industrial city of Ras Laffan, the country supplies critical long-term contracts to major markets in Asia, including China, India and Japan, as well as Europe. Almost all of its LNG cargoes transit through Hormuz.
Natural gas markets have continued to cope remarkably well with the near-term loss of most Middle East gas supply, primarily due to expected additions to LNG capacity in the United States later this year. However, LNG markets are structurally tighter than oil markets because diverting alternative supply is more difficult and excess export capacity is limited. Unlike crude oil, which can often be switched to alternative onshore pipelines or transported through different regional ports when bottlenecks occur, LNG requires very specific, localized cryogenic infrastructure. LNG relies entirely on dedicated liquefaction plants at the origin of exports and regasification terminals (or FSRUs) at the destination. Furthermore, alternative supply from regions outside the Gulf, including the United States and Australia, is insufficient to offset the loss of Persian Gulf volumes.
To balance the market, prices would be forced to rise dramatically with rising spot prices for Asian LNG such as JKM until industrial demand destruction and forced energy rationing occurred.
#3. Fertilizers (Urea, Ammonia, DAP)
This is one of the most underestimated risks. Gulf producers are major exporters of urea, ammonia, sulfur and phosphate fertilizers. Fertilizer production relies heavily on natural gas, both as fuel and as raw material. Attacks on the Gulf’s energy infrastructure and the blockade of the Strait of Hormuz, which handles about a third of globally traded fertilizers, have sent nitrogen and phosphate fertilizer prices soaring, widespread supply shortages and rising manufacturing costs. Wholesale prices for nitrogen fertilizers such as urea and anhydrous ammonia have increased by 30% to 40% in the United States; Nitrogen-based fertilizer prices have risen sharply around the world, while urea prices have seen extreme spikes in vulnerable markets.
Countries in sub-Saharan Africa, India, Pakistan and Bangladesh face significant threats to domestic crop yields and food security due to limited import alternatives and high costs. While the EU is less directly dependent on fertilizers from the Middle East, European nitrogen fertilizers are made with natural gas. The limitation of global gas supplies has driven up fertilizer manufacturing costs in Europe.
#4. Petrochemicals / Naphtha
The Iran war has severely restricted the global supply of naphtha and petrochemicals, leading to skyrocketing raw material prices, production cuts by Asian steam crackers and massive inflation in downstream products such as plastics and medical supplies.
Naphtha refining margins on Brent crude surpassed $400 per ton in Asia, while prices in northwestern Europe soared to more than $900 per ton. Because naphtha is the core component of plastics, derivatives markets have suffered massive inflation, with polyethylene and polypropylene prices on the Dalian Commodity Exchange rising more than 35%, while global plastic resins have risen more than 30%. As a result, Asian petrochemical producers, which rely on the Middle East for more than 60% of their gasoline, are facing severe shortages, forcing them to reduce operating rates and speed up manufacturing. The conflict and subsequent blockades in the Strait of Hormuz have halted approximately $20 billion to $25 billion worth of petrochemical flows, severely impacting Middle Eastern exports from countries such as Qatar and Kuwait.
The shortage of polyethylene has directly disrupted manufacturing chains. For example, food companies in Japan have been forced to change their packaging processes due to a lack of plastic raw materials. Meanwhile, healthcare supply chains (including items that rely on synthetic rubber and polymers, such as gloves and medical syringes) have seen cost increases of up to 40% and threats of localized shortages.
#5. Aluminum
The global aluminum market is currently facing an existential supply crisis caused by the Middle East conflict. The global aluminum market is facing its largest supply shortfall in more than 25 years, driven by the military conflict involving Iran, a critical combination of missile attacks on major Middle East smelters and shipping blockades that have wiped out up to 5% of global production. The current maritime blockade chokes 23% of aluminum exported out of China and also stops the incoming maritime flow of vital raw materials such as alumina and carbon bauxite. Wall Street now projects a refined aluminum deficit of at least 2 million metric tons by the end of 2026.
Direct missile attacks physically crippled several critical Gulf production facilities, with Emirates Global Aluminum’s Al Taweelah facilities in Abu Dhabi and Bahrain aluminum smelter suffering heavy damage. Restarting completely closed aluminum smelters is a grueling process that takes 12 to 18 months to rebuild, meaning this supply will remain offline even if geopolitical tensions immediately subside.
The Middle East accounts for about a fifth of US and European aluminum imports. Western manufacturers cannot easily turn to alternative suppliers such as China or Russia due to strict tariffs and trade sanctions.
By Alex Kimani for Oilprice.com
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